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ISSUE: 2026 No. 47 ISSN 2335-6677 institution.” 49 However, the practical value of these fit and proper requirements is suspect, given the current state of Myanmar’s legal system. CONCLUSION While Myanmar’s military regime has taken steps to improve its technical compliance with AML/CFT regulations, the approach has often been self-serving – using AML/CFT to push individuals and businesses into a state-controlled financial system that hurts them but helps finance the regime. This is facilitated by a multiple-exchange-rate system and forced remittance requirements for both exporters and migrant workers, which can result in significant losses compared to hundi exchange rates. This system creates the underlying incentives that drive individuals and businesses to use hundi. Yet the same regime that has created this system is also meant to regulate the informal money transfers that it incentivises. The result is performative compliance and unintended negative consequences, including increasing the challenges the Myanmar people face in accessing basic necessities through informal trade. To move beyond performative compliance towards actual improvements, a fundamental rethink is needed around how to apply AML/CFT recommendations in Myanmar. This means acknowledging that there are multiple drivers of financial activity that could raise AML concerns – including both money laundering for illicit activities and coping strategies that circumvent punitive financial sector policies that do not comply with Myanmar’s IMF commitments. While AML is essential for the first, it is not an appropriate or useful response to the second. Practically, this means a few things. First, de-emphasise technical compliance. It is not clear that providing a handbook on financial system supervision, as Myanmar did to meet FATF criterion 26.4, translates into actual improvements. 50 Second, review the FATF methodology to ensure it is not improperly by authoritarian states. FATF has previously revised its methodology, for example in 2013, when it incorporated effectiveness measures. There have been calls for further amendments to address the use of AML/CFT measures to disguise authoritarian actions. 51 These changes should also address the use of AML regulations as a tool of authoritarian states to access foreign exchange, especially when those states are not meeting international commitments. Finally, the balance between AML/CFT compliance and humanitarian needs must be changed. Though FATF states that the “flows of funds for humanitarian assistance, legitimate NPO activity and remittances are neither disrupted nor discouraged”, the reality is very different. 52 In some parts of Myanmar, there are no banks, and hundi is the only way to send money, so efforts to crack down on hundis by default impair humanitarian assistance and remittances. Many non-profits have also suffered from bank de-risking, frozen accounts and similar actions due to the consequences of AML/CFT regulations. It is essential that the FATF develop a more contextually informed and practically effective way of addressing Myanmar’s very real AML/CFT challenges. ENDNOTES 1 FATF-GAFI, “High-Risk Jurisdictions Subject to a Call for Action – 21 October 2022,” https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Call-for-actionoctober-2022.html 8

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Rules or Ruse? Myanmar’s Anti-Money Laundering Efforts Coerce Compliance with a Rigged Financial System

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English

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Digital Surveillance
Military Coup

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ISEAS Yusof Ishak Institute

Date Published: Jun 29, 2026

Abstract: Since being labelled a “Jurisdiction of Concern” by the Financial Action Task Force (FATF) in 2022, Myanmar’s military government has undertaken efforts to improve its technical compliance with the FATF’s recommendations on anti-money laundering and countering the financing of terrorism (AML/CFT). The focus on technical compliance has not adequately addressed the interaction of AML/CFT recommendations with economic policy changes – namely, the regime’s multiple exchange rate system, which is a key driver of informal financial flows. This points to a fundamental challenge – Myanmar’s regime is supposed to regulate informal financial flows that are incentivised by its own self-serving economic policies. The target of the regime’s crackdowns on informal financial flows includes money agents, known as hundis. Though connections between hundis and illicit activities such as drug production and scam centres exist, hundis’ primary business is facilitating informal trade and migrant worker remittances. Previous military regimes have acknowledged the largely legitimate nature of the hundi system. Myanmar’s military regime uses AML/CFT compliance less to address actual money laundering, and more as a tool to compel individuals and businesses to use the state-controlled financial system. This increases the regime’s access to and control over foreign currency and is a novel method of using global rules on financial crime as a cover for authoritarian economic controls to capture foreign exchange. The regime also uses AML/CFT compliance to target politically connected persons, conflict opponents and non-profit organisations. This tactic, when combined with the lack of an independent judiciary, raises questions about the effectiveness and potential abuse of AML/CFT compliance. FATF should acknowledge that a traditional AML approach is not an appropriate or useful response to financial transactions facilitated by hundis for humanitarian or legitimate economic reasons in present-day Myanmar, and should adjust the application of recommendations accordingly.

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Rules or Ruse? Myanmar’s Anti-Money Laundering Efforts Coerce Compliance with a Rigged Financial System

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